Absence of personal information doesn’t make you invisible

Firstly, it is crucial to understand that the absence of personal information on blockchain transactions does not result in anonymity.

For example, Bitcoin transactions move funds between addresses which are alphanumeric strings (containing no personal information) simply pointing to a location on the Bitcoin blockchain ledger. These addresses are recorded on-chain and are therefore visible to the public via any free explorer service such as Blockchain Explorer.

The absence of personal information on blockchain 
transactions does not result in anonymity.

Since addresses are publicly visible, they can be recorded, analysed and most importantly annotated – in other words other associated information can be assigned to them. For example, it is easy to build a directory of businesses tied to the deposit addresses they openly share.

If that business is regulated – such as a centralised exchange – then the anonymous transaction can now be connected to your identity (via the proof of identity you submitted during registration) and the traditional financial system via the banking details you associate with your exchange account.

So any authority that follows an anonymous transaction to a point that connects to your real-world identity will then have full visibility.

Cryptocurrencies aren’t anonymous they are pseudonymous. Pseudonymity provides a level of privacy whilst still maintaining a level of accountability. 

Transactions don’t include personal information, but as soon as they intersect with a regulated institution, your details become known by association. This level of visibility has given rise to the blockchain analysis industry.